Strong education system needed for economic growth
The chairman of the Arkansas Bankers Association said Wednesday that economic growth won’t happen in the absence of a strong education system.
David Bartlett, who is also president and chief banking officer of Simmons First National Corp., told members of the Hot Springs National Park Rotary Club at their noon luncheon at the Arlington Resort Hotel & Spa that the “education piece that starts us in the right direction is getting our young folks in grades K- 12 involved in understanding what economics is.”
“When we break down the state and look at the Delta ( region) and look at the lower levels of education, higher unemployment and the number of new jobs being created, it’s not right. It goes back to we’re not educating throughout our state effectively,” he said.
He said northwest Arkansas has the lowest amount of unemployment and the highest income levels, but it also has the highest K- 12 education levels.
Quoting Randy Zook, president of the Arkansas State Chamber of Commerce, Bartlett said more existing companies would expand their operations and more new companies would come to Arkansas if there was a larger workforce of educated and trained employees.
“That is a real problem for Arkansas and it is a banking problem because educated people get jobs and pay their loans. We like to make loans when we get repaid. A workforce is the key to Arkansas and we’re lacking and need to do something about it,” Bartlett said.
Giving a broad overview of the way banks operate, Bartlett said banks basically collect deposits, and then loan that money out to its customers or put them in some type investment portfolio.
He said the yield on loans, plus
investments, generates the income on the bank’s financial statements, and the money paid to customers for their deposits is interest expense. The difference is net interest income, which is what banks use to support all their other operating expenses.
Bartlett said a low interest rate environment is a cautionary area for banks and the current low rate environment “really magnified that.”
“Deposits right now are priced very, very low. That’s not good for the customer who would like to have a little better return on their deposits, but from a bank’s standpoint, we like the low interest rates. The flip side of that is we turn around and loan those deposits and the yield we get on the loan or investment portfolio is also anemic, so our spread is continuing to get depressed,” he said.
One challenge that Bartlett said banks face with the low interest rates is that “each of you wants to have a longer- term, fixed- rate loan.”
“We don’t have the balance sheet to support balances being loaned out on long- term, fixed rates when those balances have a chance to move up during the life of that loan, and it could even go underwater as far as the rate we pay on the deposits versus the interest income we’re yielding on the loan,” he said.
Bartlett said factors bankers feel like they need going forward as an industry is to keep quality loan demands at each bank, an upward movement of interest rates, and employment and job creation.